New Jersey’s First Two Offshore Wind Leases Go to High Bidders in Auction

Though wind farms off the Jersey coast have long proved elusive, their turbines could ultimately power 1.2 million homes

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The federal government yesterday awarded two leases to build wind farms off the Jersey coast, a step that could lead to harnessing ocean winds to provide power to as many as 1.2 million homes.

In an auction held by the Bureau of Ocean Energy Management, the agency selected RES America Inc. and U.S. Wind Inc. as provisional winners who paid $880,715 and $1,006,240, respectively, for the leases.

The lease sale follow years of inaction on developing wind farms off the coast, delays that frustrated clean-energy advocates, wind developers, and lawmakers. New Jersey hoped to have 1,100 megawatts of offshore wind capacity by 2020, a goal it will not meet given the lack of movement.

Still, supporters of offshore wind were optimistic about its prospects following the sale -- the latest held by the Obama administration as part of its efforts to fight climate change and cut carbon pollution.

“There’s no longer a question if there will be offshore wind in New Jersey, but when,’’ said Doug O’Malley, director of Environment New Jersey.

Not anytime soon, however.

If all the projects are approved in the nearly 344,000 acres of tracts to be leased, it could be seven to eight years before commercial operations, according to Walter Cruickshank, deputy director of BOEM.

In New Jersey, one source of frustration among offshore-wind advocates is the fact that the Christie administration has failed to come up with a financing mechanism to help pay for the wind farms, primarily by subsidies from utility customers. The state Board of Public Utilities was supposed to adopt regulations to do so nearly five years ago, but never has.

Leases are just one piece of offshore puzzle; critical financing mechanism to pay for wind power is still missing

The board is in the process of hiring a consultant to help it write the regulations. The rules are expected to offer the offshore wind farms credits for the electricity they produce, which will be subsidized by ratepayers’ bills.

“We did not view it as a barrier to a successful lease sale,’’ Cruikshank said, adding only one state in the previous nine lease sales had such a mechanism in place.

The winning bidders in the New Jersey lease sale also came out on top in two earlier auctions, officials said. RES America, based in Bloomfield, CO, had won leases in Massachusetts and U.S. Wind successfully secured a lease off the Maryland coast. U.S. Wind is based in Brooklyn, NY.

Besides the cost of the leases, the two winning bidders will pay the federal government annual rent payments until their facilities are operational, and then an operating fee for the 25-year term of the lease.

There were three bidders in the New Jersey sale. Fishermen’s Energy failed to secure a lease. The New Jersey developer also has been unable to get state approval for another pilot wind-farm project about three miles from Atlantic City in state territorial waters.

Many in the business community do not share the enthusiasm for developing offshore wind, saying it is more expensive than conventional ways of producing electricity, especially in a state with already steep energy costs.

Rhode Island began construction this past June on a project that would be the first offshore wind farm in the country, although they are common in Europe.